SWOT analysis of the textile industry of Pakistan by ndy15701

VIEWS: 7,867 PAGES: 3

									SWOT analysis of the textile industry of Pakistan
by Mohammed Ather Akhlaq.

    The textile and clothing sector is regarded as the engine of             An anti-dumping of 5.8% has been imposed on Pakistan by
growth for many developing countries in Asia, since it accounts          the European Union, which has put Pakistan in a desperate posi-
for around 45 percent of developed markets imports from the              tion to match competitors like Bangladesh, India, China, Sri-Lanky
developing countries.                                                    and Vietnam.
    Pakistan’s textile industry ranks amongst the top in the world.      Current Scenario of the textile Industry
Pakistan is world’s fourth largest producer of cotton, the third
largest consumer of the same, sixth largest importer of raw cotton            Pakistan has a very low share of the international textile market
and first class exporter of cotton yarn.                                 and due to the economic slow down in US and Europe, Pakistan’s
    This industrial sector in Pakistan has been playing a pivotal        textiles exports are also declining as they are mostly dependent on
role in the national economy. Cotton based textiles contribute           these two markets. China tops the US market with a share of 36%
almost 60% to the total exports, accounts for 46% of the total           followed by Bangladesh 21%, India 18%, Morocco 19% and
manufacturing and provides employment to 39% manufacturing               Pakistan 13%. South Korea has lost 20% market share of the US
labor force. The availability of cheap labor and basic raw cotton as     market. In the European market, China tops again with a share of
raw material for textile industry has played the principal role in       29%, Vietnam 28%, India 19% and Pakistan only 1.5% while the
the growth of the Cotton Textile Industry in Pakistan.                   Philippines had lost 11% of the market.
                                                                             According to APTMA, textile exports have declined by about
 Importance of textile industry in Pakistan’s Economy                    20% in 2008. The industry is bracing for more trouble ahead with
                                                                         continuing crises of electricity and gas, international market
                              2006-07         2007-08 (July-Feb)
                                                                         access, global economic slowdown, and adverse travel advisories.
  Share in total exports       61.1%                 53.8%               APTMA, Pakistan's spinning industry association established for
 Share in manufacturing         46%                   46%                the promotion and protection of the textile industry, says that the
                                                                         high cost of finance because of the nation's tight monetary policy
  Share in employment           38%                   39%                has added to their continuing woes.
      Share in GDP              8.5%                  8.5%
     Textile exports         $ 6.6 billion         $ 6.3 billion
                                                                             The SWOT analysis on the Pakistan’s textile industry is given
  Investment in textile      $ 6.4 billion         $ 7.0 billion
                                                                         here for the interest of readers. In this way we would identify the
Source: Textile Commissioner’s Organization.                             weaknesses in the textile industry and find the alternative solu-
                                                                         tions and remedies so as to make the textile industry competitive
    Based on abundant supply of indigenous cotton, textile is the        and efficient against our biggest challengers, India and China and
leading sector of industrial manufacturing and depends on agri-          against the emerging markets such as Bangladesh and Vietnam
culture for supply of raw material. Therefore, whatever happens
to cotton crop is likely to affect the performance of textile sector.    Strength
    Textile production is comprised of cotton ginning, cotton
yarn, cotton fabric, fabric processing (grey dyed- printed), home        1. Raw material base
textiles, towels, hosiery & knitwear and readymade garments.                Pakistan has high self sufficiency in raw material and is
These components are being produced both in the large scale              the fourth largest producer of cotton. Abundant use of
organized sector as well as in unorganized cottage/small and             cotton resources has made the Textile industry of Pakistan
medium units.                                                            move towards the area of industrialization.

                                             Growth of cotton textile industry in Pakistan
                                  Installed capacity (in 000)                                  Working capacity (in 000)
  Period    Units Spindles Growth % Rotors Growth % Looms Growth % Spindles Growth % Rotors Growth % Looms Growth %
 1997-98    442      8,368       1.68        150    4.90           10     0       6,631      1.42       80      -8.05        4        -20.0
 1998-99    442      8,392       0.29        166   10.67           10     0       6,671      0.60       66      -17.50       5        25.0
 1999-00    443      8,477       1.01        150   -9.64           10     0       6,825      2.31       66        0          4        -20.0
 2000-01    444      8,601       1.46        146   -2.67           10     0       6,913      1.29       70       6.06        4          0
 2001-02    450      9,060       5.34        141   -3.42           10     0       7,440      7.62       66      -5.71        5        25.00
 2002-03    453      9,260       2.21        148    4.96           10     0       7,676      3.17       70       6.06        5          0
 2003-04    456      9,592       3.59        146   -1.35           10     0       8,009      4.34       66      -5.71        4       -20.00
 2004-05    458    10,485        9.31        155    6.16           9    -10.00    8,492      6.03       79      19.70        4        0.00
 2005-06    461    10,437       -0.46        155    0.00           9    -11.11    9,415      10.87      77      -2.53        4        0.00
 2006-07    461    10,513        0.73        150   -3.23           8      0       7,989     -15.15      70      -9.09        3       -25.00
Source: Textile Commissioner’s Organization.

                                                                                                                    PTJ August 2009 37
2. Labor                                                            whereas we take 133 minutes for the same work. We also
                                                                    waste 30% in finishing and 12% in washing.” European
   Cheap labor has always been the backbone of the econ-
                                                                    buyers recommended that we should cut our costs up to 45%
omy of Pakistan. Cheap and ample supply of labor strength-
                                                                    in sewing by getting more efficient.
ens the industrial and agriculture sector of the country.
Around 39% of the labor force works in the textile sector. As           Labor productivity can be improved by giving the labor
Karl Marx said, that we have to use the “army of labor” pres-       appropriate training with the advancement of technology so
ent in the country for productive means. Thus cheap and             as to make them more efficient and with lower wastage of
abundant labor means low cost of production.                        resources. In China an average 70 hours of training are given
                                                                    to labor to enhance their expertise.
3. Rich heritage
                                                                    4. Poor infrastructure
    Due to cultural diversity and rich heritage, designers come
up with new different and attractive designs which are appre-          The important resources and infrastructure, such as ade-
ciated worldwide. Our culture comprises of Sindhi, Punjabi,         quate of supply of water, continuous supply of electricity and
Balochi and Pushtoo values. Also we are also influenced by          gas, efficient logistics and transportation, tax structure, raw
the Indian culture through the media exposure, which of             material supply are all basic requirements for the develop-
course gives the Pakistani designers an inspiration and taste       ment of an industrial base. However, on the other hand, the
of Karnataka, Rajhastani styles, etc. This varied culture and       industry is faced with rising charges of the energy sector,
fusion among these two neighbours gives inspiration to the          which increases the cost of production, making it difficult to
designers to give their best in terms of styles, creativity and     compete with the other regional rivals.
fashion.                                                            5. Poor quality standards
4. Domestic market                                                      With the exception of big and leading units who comply
    he recent shift of the population from the agrarian society     with global quality standards in textiles, most of the medium
to the urban areas, increased income levels and growth of the       and small sized units can not ensure the reliable and consis-
population raised the domestic demand. This means more              tent quality standards. Some of these textile units import
factories more manufacturing units, more supply and more            second hand machinery from China, India, Korea, and Taiwan
labor.                                                              with no checks and balances on the quality of the machinery
                                                                    parts and tools. Preference is only given to the cheap and
Weaknesses                                                          workable machinery with no concern of the quality of the
                                                                    machine, therefore, resulting in poor quality of the end prod-
1. Research & Development (R&D)                                     uct.

    Developed countries are using the technology of biotech-            The industry can generate more profit by adding more
nology and genetic engineering to increase the quality and          value to the product, as value can be measured in terms of
quantity of their cotton production. They are able to grow          quality, increased per unit price, etc. Pakistan’s textile indus-
colored cotton, organic cotton and several different varieties      try should focus on latest material handling techniques and
                                                                    should train workers. The inability to timely modernize the
cotton to added value to the textile chain. In Pakistan, there
                                                                    equipment, machinery and labor has led to the decline of
is very some research done on small scale by private compa-
                                                                    Pakistani textile competitiveness.
nies to invent modified cotton fibers. Practically no efforts are
being made by the APTMA in the R&D of the textile industry          6. Unstable political situation
to enhance the quality of its products, upgrade the technol-
                                                                        Political unrest, strikes and terrorism have critically
ogy used, and encourage effective methods of production in
                                                                    affected the economy of Pakistan. Frequent changing of the
order to compete internationally. Instead the industry suffers
                                                                    government has adversely maligned the policies of the textile
lack of latest means of production and falling cotton crop
                                                                    sector. According to the World Trade Review “Pakistan has
output every year. Due to low quality of cotton crop, prof-
                                                                    failed to take necessary steps needed to meet post Multi-
itability decreases and the farmer switch to the other crop
                                                                    Fiber Agreement (MFA) challenges for its textile industry
such as sugar cane, maize and thus the cotton production
                                                                    owing to lack of political will by the successive govern-
2. More dependence on cotton                                            In 1978 World Bank surveyed the Pakistan textile industry
    As the textile sector is heavily dependent on cotton pro-       and reported many deficiencies in this sector. It also gave cer-
duction, low cultivation of cotton will deteriorate the textile     tain measures to resolve these issues, but unfortunately all
industry. On the other hand, Pakistan lacks expertise in the        these problems still persist and the industry is still unable to
development, production and marketing of synthetic prod-            keep its pace with the international market. Successive gov-
ucts and fabrics required for items like swimwear, skiwear and      ernments lacked the will to reform human resources and
industrial apparel. So far Pakistan has been unable to diver-       adapt the marketing techniques, that resulted present sce-
sify in the export of textiles and is heavily dependent on          nario in this industry.
single fibre, that is cotton and its blends. This dependence on     7. System orientation and supply chain
single crop economy is restricting the diversification of
exports from Pakistan.                                                 Nowadays, customers are very systematic in their work
                                                                    and the expect the same professionalism from their vendors.
3. Labor productivity                                               Unfortunately, we lack this capability and are not competent
   Despite of the abundant supply of the labor, productivity        to struggle in the international business, thus losing many
of the labor is very low. According to a study by Federal           opportunities.
Adviser on textiles, the regional competitors of Pakistan take         On the other hand supply chain management is rarely
75 minutes to complete and produce one piece of cloth               implemented. We are disorganized, disconnected and dis-

38 PTJ August 2009
torted. Time management is very much important aspect in           6. Image building of Pakistan to attract FDI
the business and buyers expect on time delivery to match the
                                                                       Security measures should be taken to facilitate the buyers
retail launch of the Spring/ Summer or Autumn/Winter sea-
                                                                   and investors to visit Pakistan for investments. Secure busi-
sonal collections on time . Delayed delivery of export orders
                                                                   ness environment must be needed to attract golden sparrows
result increase in cost due to fines by the buyers and at times
                                                                   to facilitate business dealings and building positive image of
losing business altogether due to the breach the order con-
                                                                   Pakistan that they can rely upon.
                                                                   7. Reducing the cost of business.
                                                                       China and India are much cheaper in labor, raw material
                                                                   and utilities as compared with Pakistan. Rising inflation also
1. Pakistan Textile City
                                                                   increase the cost of production. We have to control these
    Pakistan Textile City in Port Qasim, Karachi with an area      unnecessary costs if we have to survive in the middle of the
of 1250 acres, will be completed in 2011 as a private public       two giants of the textile sector in the world.
sector joint venture. The main purpose of the textile city is to
provide the textile industry with the world class infrastructure   Threats
to meet the global competitiveness and challenges and as to
provide value added textile industrial zone. Its main features     1. New competitors
include one way window operation, constant supplies of gas             Pakistan is facing new competitors in textile sector such
and water, and uninterrupted power supply.                         as Bangladesh, Vietnam and Turkey. Though we cannot avoid
2. Marketing                                                       competition but we can always stay ahead of them by
                                                                   reforming our strategies and educating our entrepreneurs so
     Targeting the unexplored export markets with the help of      as to move one step forward in every aspect.
aggressive sales and marketing will pave the way for the tex-
tile growth. It’s all about hunting your opportunities with the    2. Phasing out of quota system
handful of colorful lollipops. If we make investment in our            As the quota system is ruled out by WTO, there is a threat
sales force and train them in the fine art of marketing textile    by the Chinese and Indian manufacturers to gain most of the
products, we can capture an much bigger market share from          market share. We have high costs, low labor productivity and
other smaller competitors.                                         inefficient production processes.
3. Collaboration with foreign companies                            3. Fashion life cycle
   By making partners with the foreign companies, we will              Fashion changes day by day these days. Media has so
be able to learn a lot from them in terms system orientation,      much penetrated in our daily lives that we easily adapt our-
supply chain and it would be feasible to import latest tech-       selves as it wants us to. This has resulted in shortening the
nology. We can also reduce our costs, comply with the inter-       fashion lifecycle thus increasing the fashion risk.
national standards, add value to our products, easiness in
                                                                       Now the buyer does not want to wait long for his con-
marketing our products in different foreign regions, improved
                                                                   signment because he is insecure that by the time it will reach
labor and thus catching up with our regional competitors.
                                                                   to him he will lost its demand due to change in fashion.
4. Re-engineering of production system                             Therefore, they prefer to buy from neighboring countries
                                                                   even at higher cost to get their products instantly rather than
    Information technology has a crucial role in manufactur-
                                                                   to wait weeks or months for their consignments to reach
ing sector. Acquiring state of the art machinery is though very
much expensive, but a very fruitful and necessary measure to
stay competitive in the long run. It is the level of trust, the    Conclusion
exporter builds with its customers by giving them flawless
products, made on state of the art machinery. Once this trust          Textile industry is the backbone of the Pakistan’s econ-
is developed, there is no other way than any unforeseen            omy. We have to seriously analyze its strengths and weakness
exception, that you may lose a customer to another competi-        so as to make the textile industry more competent among its
tor. Therefore, its highly recommended to produce with great       rivals. What we really need here is to work out the plan and
efficiency, minimizing the wastage of the raw material,            to implement it accordingly and although much work has to
energy resources and thus reducing the cost of production.         be done by Government of Pakistan, it also the responsibility
5. Producing high value products                                   of the entrepreneurs to cooperate and foresee the challenges
                                                                   and opportunities ahead. We can always win the race as it is
    It’s better to export yarn than raw cotton. Similarly it’s     never too late to safeguard and grow this vital and promising
better to export finished fabric than to export grey fabric        sector of our economy.
(raw fabric). Furthermore it’s very much feasible to export        References
readymade garments than to only fabrics. What makes the
latter better is the value added and subsequent increase in        1.    Economic Pakistan.
per unit price.                                                    2.    Economic Survey 2007-08.
                                                                   3.    South Asia Investor Review.
    Therefore, the textile industry should focus on the fin-       4.    Textile Commissioner Organization.
ished products so as to create more value in their products        5.    Pakistan Textile Journal.
and reap larger margin of profits. The industry should also        6.    Yarns and Fibers Exchange.
                                                                   7.    Business and Finance Review.
diversify into other areas such as technical textiles and non-     8.    Changinguppakistan.com.
wovens in order decrease its dependence on conventional            9.    Apparel and Textile Exports, Pradeep Joshi.
and commodity textiles, which is highly sensitive to per unit      10.   WTO Report 2008.
price and volume for the profit margin.                            11.   APTMA(All Pakistan Textile Mills Association).

                                                                                                              PTJ August 2009 39

To top